CA Legislation For 2019-2020 & 2021-2022 | Volume 2 Update

Volume II is a continuation of the summary of laws passed and pending bills in the California legislative process but not yet passed that will dramatically modify the way real estate is owned, developed, and managed. Additionally, investor motivations to own and manage real estate in California will change. Some of the new bills in process relate to up-zoning to create more multi- tenant high-density residential apartments. This will increase incentives for developers to build on residential lots. Primary changes consist of replacing local municipalities control and oversite for building, planning, & zoning with state-level bureaucracies managed by state public employees.

Localized planning tends to focus on protecting the peacefulness and tranquility of neighborhoods. Newly created state-run bureaucracies may or may not make decisions with the idea of maintaining or improving neighborhood lifestyles, or having a vested interest in you, your family, and other families.

Removing single-family zoning and allowing high density multi-tenant buildings in residential neighborhoods is now a law and a fact of life in California with an ongoing forward basis.

Valuation methods, meaning the appraisal process for residential and commercially zoned properties will change. Using replacement cost, capitalization approach and comparable sales in conforming neighborhoods, and adjusting for quality and amenities to come up with the value conclusion has been the long-standing industry standard. On a going-forward basis appraiser(s) will be task with the job of determining the financial feasibility of tearing down or modifying existing structure(s) to replace or convert to vertically constructed high-density apartment units. Calculating how many units a purchaser/developer can hypothetically build on a parcel, considering the new state mandated land-use-and-density requirements the appraiser will most likely use the residual-valuation method to calculate per unit land value for prospective future development. Per unit land value times the number of prospective units that can be built will, in most cases, result in higher value than the prior industry standard of the comparable sales method. Additional units as a bonus for building “affordable” units will be considered.

These newly mandated building standards will apply to all types of properties in all property uses and zoning classifications. For example, a commercially zoned property occupied as a church, may be considered as highest-and-best- use and greater value to tear down and replace with high-density residential apartments. As a hypothetical example, a property of 24,000 square feet may have a value of 1.2 million when compared with sales of other church properties. However, using the new state-mandated standards the property’s highest-and-best-use would be to tear it down and build 29 residential units. With affordable units a density bonus will be available. The church property would have an allowable land value of $74,000 per unit for a prospective residential rental unit development or a total of $2,200,000. The neighborhood may gain 29 units times and average of 2.5 occupants or 72 tenants moving into the quiet residential tree lined neighborhood.

Using the above example, we can expect a massive flurry of new development which may downgrade the quality of life for many who prefer a peaceful and quiet neighborhood lifestyle. Quiet neighborhoods may change into high- density transient-occupant tenancy that brings noise, neighbor conflicts, traffic congestion, crime, along with increased neighborhood hustle-bustle.

Bringing to California millions of new illegal immigrants, loads of new homeless, and importing financially dependent parties from other states, all who expect government support and transfer payments is now the norm. 70% +/- of the above subsets will go on welfare, and/or government subsidized housing.

This is where California is heading. Reference below: 

https://www.breitbart.com/politics/2018/12/04/study-more-than-7-in-10-california-immigrant-households-are-on-welfare/

Laws and regulations are generally assumed to be for the benefit of the public to represent rule of law, contract law, fairness, and equity. However, in many cases laws and regulations are designed for the purpose rearranging or supplanting segments of the U.S. economic engine to benefit subset parties including public employees, public/private labor unions and individuals/companies/corporatists who are friends of the government- (FOGs). FOG’s includes elites in governing high places who control and make the rules.

Most of the new laws and proposed new laws will require state-level bureaucracies full of public employees to manage them and who will expect to be paid for out of tax payments from the productive class. California will be required to build millions of new stack-and-pack super-high-density housing units. The words “social engineering” and “socialism” comes to mind!

Each newly mandated program will require new government bureaucratic agencies, departments, divisions, supervisors, field officers/investigators, general operational employees, etc. All this will be staffed by new public employees, many make-work jobs, with high income, benefits, and retirement packages.

Entrepreneurial property owners will become subject to increased record keeping, reporting, government oversight, inquires and investigations, unwanted fees, responding to staff findings, appeals, imposing new taxes, punitive consequences, financial penalties, and probation to ensure compliance and submission. All the above will require that the property owner(s) hire competent legal counsel or a consultant to guide them through the process. All the above will result in an expensive and time-consuming proposition and may serve as a negative motivating factor to get involved in residential income property ownership in the state of California.

Many of us have experienced this complex and frustrating process, having to respond to written application requests for approval, administrative hearings, administrative judges, and investigators who are government employee labor union members, and it is a scary process. I refer to administrative judges as labor union members with blue-jeans and a black-robe to look official and gain institutional power. Rational and lawful arguments are rarely given enough consideration to render a fair decision in favor of the capitalist property or business owner.

SB6-Residential development: available land in commercial zones

This bill was passed out of the house of origin (Senate) and is now in the Assembly but held at the desk (The bill has not been referred to the rules committee for assignment to policy committees).

Review below:

https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=2 02120220SB6

For most recent changes click on Bill Analysis 05/22/21-Senate Floor Analysis.

Major provisions:

1) Enacts, until January 1, 2029, the “Neighborhood Homes Act,” which establishes a housing development project as an allowable use on a neighborhood lot, defined as a parcel within a commercial zone where office and retail uses are permitted, so long as the parcel is not adjacent to an industrial use.

2) Requires a housing development project on a neighborhood lot to comply with all of the following:

• The density for the residential housing development must meet or exceed the applicable density deemed appropriate to accommodate housing for lower income households under housing element law.
• The development project must comply with all local zoning, parking, design, public notice or hearing requirements, local code requirements, ordinances, and permitting procedures that apply in a zone that allows housing at the density required by this bill. If more than one zoning designation in the city or county meets this requirement, the zoning standards that apply to a neighborhood lot are the same zoning standards that apply to the closest parcel that allows for residential use at that density. If the existing zoning on the parcel allows denser residential use, the existing zoning applies.
• All other local requirements for a neighborhood lot, other than those that prohibit residential use or allow residential use at a lower density than provided by this bill.
• The development must record a deed restriction that at least an unspecified percentage of the units have an affordable housing cost or affordable rent for lower income households.
• The developer certifies that the project either is a public work or will pay prevailing wage and use a skilled and trained workforce for all levels of contractors. This is designed to promote unions and require union workers.
• The project consists of entirely residential units or a mix of retail commercial, office, or residential uses, except that the project cannot include a hotel or other transient lodging and must devote at least 50% of the square footage of the project to residential uses.
• The local agency requires that the rental of any unit is for a term longer than 30 days. This is primarily to destroy the short- term rentals such as Air BNB.

3) Allows local agencies to exempt a lot zoned for commercial retail or office use from the bill if the local agency concurrently reallocates the lost residential density to other lots so that there is no net loss in residential density, but only if the lots are

• Suitable for residential development, using an existing definition in housing element law; and
• Subject to an ordinance that allows for development by right.
• Provides that its provisions do not alter or lessen the applicability of any housing, environmental, or labor law applicable to a housing development authorized by the bill, including, but not limited to; the California Coastal Act of 1976, the California Environmental Quality Act (CEQA), the California Housing Accountability Act (HAA), density bonus laws, obligations to affirmatively further fair housing laws, and state or local housing and tenant protection laws.

Comments:

• As noted above there is a tremendous amount of overlapping complexity in the approval process that will drive up the cost of building and may discourage developers from trying.
• Enables developers to override cities and local municipal planning and building departments to purchase and tear down stores and businesses to build residential high-density apartments and condominiums in commercial corridors that have had vacancy problems for 3 years.
• This new law will require higher density for housing developments that meet or exceed those appropriate to accommodate housing for lower income households, including density of at least 20 units per acre for suburban jurisdictions.
• Appropriate to accommodate housing for lower income households is referred to as “affordable housing.” This simply means jacking up the prices of the non-affordable units to subsidize those deemed “affordable.”

SB 9- Housing development: Approvals.This bill was passed out of the house of origin (Senate) and is now has been referred to the Assembly Committee on H. & C.D., was given a due pass on June 9, 2021, but has been subsequently re-referred to the same committee.

https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=2 02120220SB9

For most recent changes click on Bill Analysis 06/08/21- Assembly Local Government.

Major provisions:

• This bill has now re-zoned most statewide single-family residential properties to allow for the replacement of existing structures with multi-unit high-density residential income properties.
• Allows for the creation of (when combined with state accessory dwelling unit AUD law) of up to 10-residential units, and authorizes further urban parcel/lot splits, without any local discretionary hearing or review, including compliance with the California Environmental Quality Act (CEQA).

Comments:

• Requires local government to “ministerially” approve housing developments containing no more than two residential units in single-family zoned areas. Local government would also be required to “ministerially” approve urban lot splits. This will deny localized public hearings and public input.
• Local municipalities have no discretionary authorities, reviews, or hearings. All actions are strictly ministerial consistent with a local general plan that coincides with the state level regulation.
• Pension funds and corporate interests are purchasing homes that are eligible for tearing own and rebuilding high density apartments.

AB 989- Housing: local development decisions: appears.

Passed out of the house of origin (Assembly) and referred to the Rules Committee for assignment.

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id= 202120220AB989

For most recent changes click on Bill Analysis 9/05/24/21- Assembly Floor Analysis

Major provisions:

•  According to the California Housing Partnership, California Needs an estimated 2,600, 000 additional homes over the next 10 years, including 1,200,000 homes “affordable” to lower income households.

Comments:

• California Housing Partnership was created in 1988 as a private nonprofit organization with a public mission to help create affordable housing for families, homeless, veterans, seniors and disabled.
• The term “affordable” is a misnomer. Affordable does not mean to build and save money in the process nor to make more affordable for all, but rather to lower the prices of those units deemed affordable and raise the prices of all other units. A purchaser of a regular unit would pay a market rate plus a penalty/premium for the compensated transference to reduce the price of the affordable unit. It is deemed affordable to one party who benefits by under market pricing and a screw-job to the other who must pay a premium for the purchase of their property. This constitutes transfer of wealth, from one subset of consumers to another subset as dictated by government mandate.
• Anytime the consumer sees the term “affordable,” look out, the government is coming to pick your pockets by forcing you to pay a premium for your real estate purchase.

AB 1401- Residential and commercial development: parking requirements.

Passed out of house of origin (Assembly) and referred to Committee on Rules for assignment.

https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_ id=202120220AB1401

For most recent changes click on Bill Analysis 05/20/21 Assembly Floor Analysis.

Major provisions:

• This bill would prohibit local governments from imposing minimum parking requirements, or enforcing minimum parking requirements on residential, commercial, or other developments if the development is located on a parcel that is within one-half mile walking distance to public transit or located within a low- vehicle miles traveled area.
• Vehicle miles traveled (VMT) per capita is calculated as the total annual miles of vehicle traveled divided by the total population in the state or in an urbanized area. The data is calculated as the total miles of vehicle travel divided by the total population.
• The obvious conclusion is that the California leadership wants to switch people out driving cars into public transportation or bicycles.

SB 12- Local Government: planning and zoning: wildfires.

This bill has passed out of the house of origin (Senate), and has been double referred to the Assemble Committee on Local Government and H. & C.D.

https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=2 02120220SB12

For most recent changes click on Bill Analysis 05/22/21-Senate Floor analysis.

AB 816- State and local agencies: homelessness plan.

Passed out of the house of origin (Assembly) and referred to The Senate

Committees on Housing, Human Services, and the Judiciary.

https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=2 02120220AB816

For recent changes click on Bill Analysis 05/24/21- Assembly Floor Analysis.

Major provisions:

• Mandate’s state and local officials to heighten sense of urgency and accountability about mass homelessness.
• Requires local and state government to develop real, actionable plans to reduce homelessness by 90%, and to take steps to address racial and ethnic disparities.
• Create a new Homelessness Inspector General who can bring action against the state or local governments who fail to submit and implement a plan.
• Comments:Prior to the Coronavirus pandemic there were estimated 150,000 people in California who were experiencing homelessness. An estimated 25% are living with severe mental illness 

Thank you for reviewing the above overview. Each bill contains many pages of complexity and overlapping issues to be considered for property owners. For those interested you are advised to obtain a copy of the bills online to follow the progress. Also, the same applies for bills passed into law for detailed analysis. I encourage those affected by all these new cumbersome regulations to consult competent counsel. I have only given a very brief and incomplete overview of each because a complete analysis would be far too cumbersome to read. 

You may share with business associates and friends. Also, you may also email me if you want a copy of Volume I. 

Thank you,

Dan Harkey